The vast majority of the brokerages were hit when the whole chain of forward contracts they were trading with one another turned sour when the blue-chip conglomerate Pan-Electric, a favourite of many punters then, could not service a debt load of some $450 million.
In an unprecedented move to deal with the systemic crisis, the stock market was forced to shut down for three days to sort out a rescue plan. Only three brokers in town were left unscathed in its aftermath: Lee & Co, JM Sassoon and the then 10-year-old Phillip Securities, which was operating out of its namesake Phillip Street near Boat Quay.
Four decades later, of these three names, just Phillip Securities remains. “When you deal with human greed and leverage, it will keep repeating — and it is just to what extent it becomes systemic,” says founder and executive chairman Lim Hua Min when asked to recall takeaways from the Pan-El episode in a recent interview to mark the privately-held firm’s 50th anniversary.
While stockbroking remains its core business activity, the firm has grown into an integrated financial services provider operating in 15 markets with some US$65 billion ($83.8 billion) of assets under custody. The firm has taken on the holding company name of PhillipCapital to better reflect the much broader range of activities and size. The firm now provides investment advisory services, creates exchange-traded funds, sells insurance, distributes unit trusts, helps companies raise funds, and manages forex, among other services.
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PhillipCapital has survived round after round of industry consolidation to become one of the largest brokerages in Singapore. “We used to be a single-product, single-channel company. Today, we are multiple-product, multiple-channel. The idea is to shift from product-centric to customer-centricity, whatever the customer needs,” says Lim.
Phillip Securities, founded by Lim (centre), was one of the three brokerages that remained unscathed in the wake of the 1985 Pan-Electric crisis. Today, it is the only firm out of the three that remained / Photo: PhillipCapital
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With cross-border trading now second nature, the firm has already offered clients trading on various exchanges across different markets and, more recently, in different variations. For example, clients in Asia can trade US equities during Asian time zones to diversify their portfolios.
Having said so, Lim is ready for the fact that broking commissions will continue to be under pressure, especially in developed markets. This trend started over two decades ago when rates were “liberalised” and the emergence of online brokerages disrupted the traditional method of retail investors trading stocks by calling up their remisiers to put in a “buy” or “sell” order.
That is why the firm is constantly expanding its offerings of products and services, adapting to new business models such as shifting from purely transaction-based fees to wealth management services, which, by its nature, becomes a more powerful proposition the bigger the asset base is.
Besides more than 600 remisiers, PhillipCapital has around 900 financial specialists, including financial advisors, trading representatives and fund management representatives. They operate varying business models, serving different markets. Some are akin to private bankers serving very high-net-worth customers, but others are more focused on a larger group of retail investors.
The variations apply to products as well. For example, some focus more on insurance, while others provide active management and advisory services. For those serving more sophisticated investors, PhillipCapital also offers access to private equity. It has set up teams to serve specific customer segments, such as Japanese-speaking teams for Japanese customers, to differentiate itself better. Besides advisors, there are other product specialists and so on who can be tapped on to give better advice, not unlike wealth management operations run by the banks.
Given that PhillipCapital provides most of what a private bank offers, does Lim aspire to be a full-fledged private bank? He points out that PhillipCapital’s shareholder funds are already bigger than those of some private banks. Having said so, what Lim is more eager to flag is his regional network of entities providing a growing range of financial services in 15 countries. “The idea is we are building a network of financial services,” he adds.
As conditions, opportunities, limitations and licensing conditions differ from country to country, PhillipCapital tries to be agile enough to capture and develop what and where it can. For example, it runs a full bank in Cambodia where micro-financing is offered as well; in Japan, it has a real estate business investing amounts in the billions, including a REIT; in Thailand, it is a life insurer, selling policies via agents; and engages in trading in India’s Gujarat International Finance Tec-City and Mumbai, Chicago, London, Tokyo, and, of course, Singapore.
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Beyond broking and playing the intermediary role, PhillipCapital manufactures and distributes financial products such as general and life insurance and other financial derivatives. “We are not different from, you know, a bank,” says Lim.
Some years back, there was a certain prestige or assurance with the term “bank-backed brokerage”. For PhillipCapital, not being one does not matter, as it has a wide range of products and services on tap with the clear underlying goal of helping clients be savvier in growing their wealth.
Thus, Lim has a different take when asked if stockbrokers will become increasingly irrelevant. “Investing will always be there, but stockbrokers may not; banking will always be there, but banks may not; insurance will always be there, but the insurance company may not.”
Lim says that because change is the common denominator, learning to innovate and adapt earlier is critical. The stockbroker needs to be more versatile and multifaceted. Some stockbrokers have chosen to become personalised fund managers. At an organisational level, some broking firms can aspire to shape up to become the likes of Goldman Sachs, but it does so much more; BlackRock, better known as an asset manager, has its fingers in many different pies within the broader financial services industry. “Is it a fund manager? Is it a bank? It is everything,” says Lim..
Honest broker
This year, the Singapore market ecosystem has an added buzz with the Straits Times Index hitting a new record, finally, thanks mainly to the prospects of market revitalisation measures being put in place by a top-level committee formed by the Monetary Authority of Singapore (MAS).
A key proposal is a $5 billion fund to be allocated by MAS to various fund managers so they can pick stocks not in the benchmark Straits Times Index to invest in. While acknowledging this as a good move, Lim points out similar schemes are already in place in other markets, such as Hong Kong and Japan, where the funds managed by the respective governments actively trade.
This issue of reviving the local bourse ought to be seen from a broader perspective. Lim says the world at large has changed, so the Singapore market needs to respond to the changes. Given the magnitude of the changes, businesses must manage and adapt themselves systematically instead of solving one local problem after another; challenges are especially pronounced as PhillipCapital continues its growth bid outside Singapore.
“For companies like us, we are very local. We want to be global, but it is challenging, especially in many Asian countries where the doors are not open and there are obstacles for foreign players. In some countries, you will need 10 licences to compete with the local incumbents, but they give you one licence at a time. By the time you have your 10 licences, you are already late because you take one or two years to earn one licence at a time. Singapore is a bit more enlightened. We make it very easy for international firms to play here,” he says.
Having said so, Lim is setting his sights on emerging or even frontier markets to capture better growth potential. For example, PhillipCapital has built up a customer base in Central Asia, with the Middle East on Lim’s radar, too. Even the Balkans — a world away from the so-called “conventional” Western markets — are markets of opportunities and interests to him.
Lim acknowledges the difficulties of building a well-honed ecosystem just by operating in Asia, much less as a “real global player”. In Western European and US markets, laws and mindsets are more in sync as governance is based on the Judeo-Christian framework, like ethics and human rights. However, each country in Asia is different, he says.
Amid these challenges and opportunities, Lim has a “very strong idea” of what PhillipCapital can do on a broader level over the longer term. According to Lim, Singapore has always enjoyed a good reputation as an “honest broker” as it tries to offer external parties something else, given this market’s physical limitations.
Lim believes Singapore can be an excellent intermediary and a “mobiliser” for others across Asia and beyond. From a recent trip to Slovenia and Croatia, Lim observes that these small former Soviet bloc countries struggle to grow their economies. Not only are they small, which means they are under the radar of most businesses, but they are also landlocked. If they can come together as an economic bloc and build better ties with Singapore and Asia, many more things can be achieved, says Lim. For example, wine is produced more cheaply than water in some of these countries, so why can’t they sell more of what they have already produced in untapped markets here in Asia? “We can do with new thinking, new reformatting,” says Lim.
Lim, seen in a 2006 meeting with Japan’s then Emperor Akihito, believes that Singapore firms, including PhillipCapital, can play the “honest broker” role by bridging multiple markets and economies / Photo: PhillipCapital
Closer to home, Lim sees a good opportunity for PhillipCapital to play a bridging role between China and Japan. He has a long and established presence in Japan. The firm is a member of three stock exchanges in Japan: Tokyo, Osaka and Fukuoka. Besides stock trading, PhillipCapital owns a real estate business in Japan, which it jointly manages with Tokyo-based financial services group SBI Holdings, sometimes referred to as Strategic Business Innovator Group.
With time in this market, PhillipCapital has built a network of relationships within the Japanese business community and gained a deep understanding. From Lim’s perspective, the Japanese are disciplined, have developed many leading-edge technologies and are good at manufacturing. However, given the language barrier, they are not as good at servicing non-Japanese-speaking customers and investors keen on Japan.
Like it or not, there is a historical love-hate relationship between China and Japan, observes Lim. In the first few decades of the 20th century, when China was in the doldrums, many of the country’s intelligentsia went to Japan for further education, including Lu Xun, the famous author. “What we can do is to build this ‘Japanese’ into Asia, bring their strengths and capabilities to other markets,” says Lim, adding that similarly, PhillipCapital can try and bring Asia to Japan.
This bridging role is not limited to Asia. With Singapore’s command of English, people here have better versatility at building ties and businesses across borders and between economies larger than Singapore itself. “Why can’t Singapore be a good middleman? That’s what we should be doing. The essence is, how could we be a big market, right? How can we be a centre to provide all this?” says Lim. Another suggestion is to have an Asean-wide, or even Asia-wide, stock exchange, with PhillipCapital ready to be part of such an initiative and even provide liquidity.
Partner in finance
Looking ahead, Lim is upbeat about the growth potential. “The framework has been set. But it should not stay still. We should be evolving. And we have to keep asking ourselves: how can we be relevant? We want to be relevant.”
Lim defines relevance as providing a value proposition that is not winning at the expense of the other party. “One of the things about the relationship between the buyer and seller is a point in time. A point-in-time relationship tends to be more adversarial because there is no obligation to each other. However, when you are structuring a partnership and building ventures, it is a relationship over time. You cannot afford a win-lose situation. You cannot afford this trade war where one party feels it is being ripped off.”
Therefore, as indicated in PhillipCapital’s tagline, “Your partner in finance”, Lim makes its point that a relationship has to be a win for both sides. “You have to have a positive-sum game, not a zero-sum game, or worse, a negative-sum game. My philosophy in life is very straightforward: if I partner you, I better make sure you can win, then both sides win. If not, if I win, you lose, and I have to always look behind my back to see whether you will stab me. Why do I live my life like that? That must be stupid.”
PhillipCapital makes it a point to ‘grow its own timber’. Today, its top management team boasts members, each with over 20 years of experience in the firm. From left: Lim Wah Tong, Jeffrey Goh, Loh Hoon Sun, Luke Lim, Lim Hua Min, Gillian Tan, assistant managing director of the Monetary Authority of Singapore, Lisa Lee, Teyu Che Chern, Linus Lim / Photo: PhillipCapital
PhillipCapital grows its own timber and for others
In its 50 years, PhillipCapital has grown to the extent that revenue outside Singapore now accounts for some two-thirds of the total. Acknowledging the physical limitations of the home market, executive chairman Lim Hua Min has no qualms projecting that Singapore can, in the long run, contribute as little as just 10%. “If you just stay in Singapore, whatever you do is to try and work in a small market.”
At nearly 80 years old, Lim has long relied on a team of top managers to run the show. He sees his role as being “provocative” instead of “directive”. As an example, Lim says he motivates his various country managers by telling them they all have the potential to beat Singapore, the home market. “Your market is bigger; why can’t you make more money than Singapore?”
Many market participants have lamented how the Singapore stock market, until the pick-up in trading volume this year, has seen the defection of investors for supposedly more liquid and exciting bourses like Hong Kong and the US.
As part of a top-level push to revive the local bourse, the Monetary Authority of Singapore, among other measures, proposes allocating $5 billion to various fund managers to invest in smaller counters outside the Straits Times Index to attract more funds to take part.
When asked if a local institution like PhillipCapital can play a role in reviving the Singapore market, the question drew an immediate “of course” from Lim. “As a local broker, we are very grateful for what the Singapore market has given us to be where we are today. So, we want to revitalise it,” he says.
One way PhillipCapital is doing its part to make the local investment ecosystem more interesting is to help introduce and promote new products, such as the Singapore depository receipts of some Thai blue chips. It has dabbled in crypto-based products such as NFTs (non-fungible tokens) and even tokenised offerings where the underlying product is whiskey.
Lim acknowledges some new products may have a slow start but finds it worthwhile nonetheless to do its part for the market ecosystem here with the Singapore Exchange , which is also taking a risk trying new products to see what works. “We will be supportive and try out new ideas. It might not be easy because it is new, but we will try. It is our part in nation-building,” says Lim.
Even as PhillipCapital puts some marketing muscle behind new products, it is by no means neglecting existing listed companies. For example, some of these deserving companies suffer from low trading interest. What PhillipCapital has been doing is to be an active party to the various research schemes meant to turn the spotlight on these counters. There are also numerous seminars hosted by PhillipCapital featuring different listed companies, which appear in the regular stream of content pushed out via its various channels.
PhillipCapital is also willing to invest time and effort in arranging in-person visits by its clients to the listed companies’ premises for deeper engagement sessions. In a way, that forms a positive feedback loop: Listed companies that have engaged with investors via PhillipCapital have commented they ask some very good questions, a clear indication of their interest in understanding the business of these companies better, instead of making a quick punt.
Lim also points out that PhillipCapital has been contributing to the Singapore market ecosystem in another significant way. Over the years, Lim has seen many employees leave and join other firms, including the stock exchange. Lim notes that PhillipCapital has also “provided” CEOs to a few competitors, especially the new ones setting up shop here in recent years. However, he has no hard feelings. He sees these moves as “positive” and is “very proud” as a sign that PhillipCapital has been training its people well.
In the earlier years, Lim was helped by a team of senior colleagues who helped build PhillipCapital. Two of them are still involved in the firm today, albeit in non-executive roles: Senior advisor Loh Hoon Sun, who joined in 1990 and is a long-time managing director, and non-executive director Lim Wah Tong, who joined in 1987.
Today, PhillipCapital’s top management team includes executive directors Jeffrey Goh, Lisa Lee and Teyu Che Chern. Goh joined in 1993 and was instrumental in launching POEMS, Singapore’s first retail online trading system, three years later. He is now responsible for the growth of the securities business, which encompasses equities, fixed income, and corporate and institutional sales, among others.
Lee, who oversees wealth management and talent acquisition, joined in 1997. She is known to be a proponent of financial literacy for the masses and, in one recent episode, helped make available to retail investors the sale of some unit trusts without charging platform fees, so they were more accessible.
Teyu, who joined in 1998 as a management trainee, is better known as the CEO of Phillip Nova, another full-fledged brokerage unit within PhillipCapital, apart from Phillip Securities. Phillip Nova is the new branding of what was called Phillip Futures. The new name is to reflect Phillip Nova’s own securities brokerage licence.
Lim’s two sons are also being given increasingly key roles within PhillipCapital. Luke, managing director of Phillip Securities, joined in 2004 and is in charge of Phillip Securities Singapore and has also co-founded POEMS Venture, one of the venture capital arms of PhillipCapital. Since 2019, Luke has been the chairman of the Securities Association of Singapore. Linus joined in 2001 and is CEO of the fund management arm, PhillipCapital Management. Before this role, Linus was director of corporate broking at PhillipCapital London. “We grow our own timber,” says Lim.
